Rosenblatt Surveys HFTs, Publishes Findings

Editorial Staff
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One market consultancy is giving the equity markets a peek into the inner machinations and thinking of high-frequency traders.

Rosenblatt Securities, responding in part to requests from clients, government grandstanding and others, said the firm though it would be worthwhile to survey its contacts in the automated proprietary trading world for information on the nature of their operations.

Rosenblatt Securities surveyed 39 firms globally, and received responses from 30 individuals at 19 firms. The biggest single respondent cohort was C-level executives at HFT firms. In addition to general and demographic information about these firms, our questions focused specifically on their behavior in the U.S. cash equities market.

Several of the survey’s key findings conflict with popular perceptions of HFT. Rosenblatt sahred some of the key highlights:

* Most HFT firms were founded before Reg NMS
* The vast majority of HFT firms are US-registered broker/dealers
* Most don’t operate dark pools or other off-exchange platforms
* Despite the hype, most HFT firms are not yet trading OTC swaps
* Average holding periods in US equities are surprisingly long
* Many HFT firms trade thousands of US equity securities, not just the top 100-200
* A significant minority of HFT firms mostly removes liquidity from US equity order books
* Order cancellation rates in US equities are lower than many believe
* Most HFT activity in US equities occurs on registered exchanges
* HFTs’ on-exchange trading in US equities is concentrated on “maker-taker” venues
* Per-share profits are tiny, and may be lower than we previously estimated
* Most HFT firms lose money on at least 40% of their US equity trades

The full report can be requested from Rosenblatt Securities.

Top 2014 Trends: FINRA Requires ATS to Report Trade Data

Editorial Staff
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And the Financial Industry Regulatory Authority said, Let there be light.

After years of keeping their trade data hidden in relative secrecy, alternative trading systems, or dark pools, now have to disclose their trade data publicly. And while the hotly contested debate still rages over just how soon these trading venues have to publish their trade data after the actual execution, what was once a dark secret is no more.

According to industry data, dark pools currently see 17 percent of trading volume in the $24 trillion U.S. stock market. In comparison, NYSE and its smaller offshoots account for 23.1 percent of volume, Nasdaq 19.7 percent and BATS 20 percent. All told, the exchanges or lit venues control 62.8 percent of all U.S. equity trading volume.

Shares changing hands in private venues, including dark pools, accounted for 40.4 percent of total share volume this past summer, reaching a two-year high, according to data compiled by Bloomberg. Thats the most since 41.7 percent took place off-exchange in June 2012. The three biggest exchange companies each matched about 20 percent of trading during the summer.

FINRA, which began publishing data on private venues in June, has continued to discuss additional ways to make off-exchange trading more transparent, bringing more light and transparency to dark pools. Several proposals being circulated advocate for making ATSs disclose more information about their order books and expand the data they publish about the volume of over-the-counter trading by stock. Also, ATSs could be forced to disclose their supervision and governance policies, as well as report and register the algorithm developers a pool uses and trade clock sequencing.

While regulatory pressure has been brought to bear this year, the ATS operators arent standing pat and waiting for the next government fiat as to what they should do. Already, several brokers have responded to increased scrutiny by publishing their dark pools Form ATS, a file that describes how the platform operates. Once buried in the files of the SEC, these documents, which detail the intricacies of a pools inner workings, such as order types or routing procedures, are now available on the brokers websites. Credit Suisse, Deutsche Bank, Goldman Sachs and JPMorgan Chase have all published their forms, as have IEX, KCG Holdings, Liquidnet and ITG.

Barclays Dark Pool Case Judge Questions N.Y. on Victims Absence

Editorial Staff
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(Bloomberg) — New York Attorney General Eric Schneidermans lawsuit accusing Barclays Plc of bilking customers to expand its dark pool was scrutinized by a judge for not naming specific victims of the alleged fraud.

New York State Supreme Court Justice Shirley Werner Kornreich asked a Schneiderman deputy at a hearing last week in Manhattan about a parallel lawsuit by investors in federal court over similar allegations. The judge said she found the states suit hard to follow, adding that the complaint cited trade journals and newspapers as evidence of the banks misleading statements and not alleged victims.

Its hard for me to believe that a very sophisticated investor would base his choice of investment platform on a newspaper article, Kornreich said.

Schneiderman sued Barclays in New York State Supreme Court in Manhattan in June, accusing it of lying to customers and hiding the role of high-frequency traders. The bank in July filed papers asking the court to throw out the case, arguing the state hasnt shown that clients have been harmed.

New York has sought a leading role in reforming equities trading in the $23 trillion U.S. stock market, partly by examining whether dark pools — private stock markets usually operated inside large banks — give unfair advantages to high- frequency traders. Private venues such as dark pools now handle almost 40 percent of the volume of equity markets.

Dark Pools

Unlike exchanges such as the New York Stock Exchange, dark pools keep the supply and demand private until after a trade is executed. While that can help investors get better prices by masking their strategies, the opaqueness fuels suspicion that dark pools owners dont treat some customers fairly.

Jeffrey T. Scott, a lawyer with Sullivan & Cromwell LLP representing the bank, told Kornreich Thursday that the state hasnt complied with the 1921 Martin Act anti-fraud statute requiring the attorney generals office to identify specific investors who were damaged by the alleged activity.

I dont know what clients they are talking about, Scott said. They havent identified anybody.

Deputy Attorney General Chad Johnson called the suit a classic Martin Act case. He told Kornreich the statute covers activity that can affect any securities transaction — whether it actually takes place or not — and doesnt require the state to show that specific investors were harmed.

Martin Act

The point of the Martin Act is to enforce the laws of New York, which broadly prohibit any scheme, any device, any transaction which can have an effect on securities transactions, Johnson said.

In the Barclays case, he said, Youve got false documents, misrepresentations, the failure of the broker-dealer to act on the part of their clients and impact on the securities transactions that it was handling on the behalf of their clients.

The judge noted that a similar lawsuit has been brought in federal court by Barclays investors, including large institutions and sophisticated individuals, over claims that the bank hid the role of high-frequency traders in the dark pool.

Elliot Stein, an analyst with Bloomberg Intelligence, said the hearing practically flipped the burden of proof to the attorney generals office. The judge appears inclined to dismiss the suit and may do so early next year, possibly with a chance for Schneiderman to refile it with more specific allegations, said Stein, who is a lawyer.

Federal Lawsuits

A panel of federal judges ruled this week that the five cases against London-based Barclays will be consolidated before a federal judge in New York to make pretrial information exchanges quicker and less costly.

Johnson said his office often brings cases with parallel private actions, like those in federal court, and that the plaintiffs in those suits will face hurdles that wont be an issue in Schneidermans.

The judge said she will rule later on the banks motion to dismiss the suit.

The case is New York v. Barclays Capital Inc., 451391/2014, New York State Supreme Court, New York County (Manhattan).

NYSE Proposed Market Overhaul to Start With Dark Pools, Less Fees

Editorial Staff
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(Bloomberg) — The New York Stock Exchange is working to marshal Wall Street support for a plan that would overhaul features of the U.S. stock market that have drawn criticism from investors in the past year.

A draft proposal circulated by NYSE among investors and brokers seeks a grand bargain across the industry, according to a person who saw it who asked not to be named. The arrangement would include curbs to keep most trades off private venues such as dark pools and agreements by exchanges to cut trading fees and stop an incentive system known as maker-taker.

NYSE hopes to win enough support to take the plan to regulators for formal approval, according to brokers who have spoken to exchange officials. Credit Suisse Group AG, which runs the biggest U.S. dark pool, backs the NYSE proposal, according to people familiar with the matter.

We have been meeting with members of the industry for the past year and trying to facilitate compromise on a key set of issues that investors care about, Jeff Sprecher, chief executive officer of NYSE parent Intercontinental Exchange Inc., said in an e-mailed statement. Weve collected input from the investing community ranging from the buyside, issuers, market- makers and sellside and believe it is prudent to use these insights to build consensus to help solve some of the complex issues facing our industry.

A year ago, Intercontinental Exchange bought the NYSEs parent company, and Sprecher has ever since promoted ending the status quo in the $23 trillion U.S. equity market. The three stock exchanges ICE owns handle about one-fifth of U.S. equity volume. Exchanges owned by Nasdaq OMX Group Inc. and Bats Global Markets Inc. handle roughly the same amount, while close to 40 percent of volume takes place on private venues such as dark pools.

Simplifying Market

That network of trading platforms could be simplified by the NYSE plan. The proposed curbs on trading in dark pools, known as a trade-at rule, would keep most routine stock trades on exchanges, where bids and offers for shares are public. Critics argue that having dozens of trading platforms makes the market too complicated and opaque.

Spurred by regulatory changes, NYSE has lost its grip on U.S. trading. A decade ago, it handled about 80 percent of trading in the corporations it listed. Nasdaq has also seen its market share dwindle.

One way exchanges try to attract volume is paying rebates to liquidity providers, the system known as maker-taker. Critics contend this unfairly influences where brokers decide to send orders to trade stocks. The NYSE proposal would eliminate maker- taker, according to the person who saw the plan.

When fees and payments are not passed through from brokers to customers, they can create conflicts of interest and raise serious questions about whether such conflicts can be effectively managed, Securities and Exchange Commission Chair Mary Jo White said in a June 5 speech.

Lower Fees

The NYSE proposal would cut exchange trading fees to 5 cents per 100 shares from the current 30 cents, according to the person who saw the memo. Trades of at least 5,000 shares would be exempt from the trade-at rule, meaning they could keep trading on dark pools just as they always have.

At an event organized by Representative Scott Garrett, a New Jersey Republican, and other House lawmakers in May 2013, Credit Suisse executive Dan Mathisson said he could support a trade-at rule if combined with a large decrease in the fee. Nicole Sharp, a spokeswoman for the bank, declined to comment on the NYSE proposal.

NYSE also suggests having brokers more involved in the governance of the public and private data feeds that serve as the backbone of trading, people familiar with the matter said.

Sprecher, along with a group of about 15 industry executives, met with members of the Securities and Exchange Commission in February, Bloomberg News reported at the time. The group asked commissioners to conduct a pilot program to test whether stocks would trade differently without maker-taker.

The stock market has come under unprecedented scrutiny this year, with the SEC, Justice Department and New York attorney general all investigating possible abuses. One of the years best-selling books, Michael Lewiss Flash Boys, portrayed a market where individuals are taken advantage of by Wall Street insiders.

Top 2014 Trends: Fewer Algos but More Customization

Editorial Staff
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The days of hundreds of algorithms on a buyside traders desktop order management system are gone.

Now a trader has just a handful of electronic tools from which to enter his orders despite myriad algorithm providers. But the key difference is that the few algorithms in his arsenal are often custom- tailored to his particular needs — built for him from standardized off-the-shelf modules — and very ready to use.

Vendors and brokers alike, aware of the buysiders limited budgets and desire to trade faster and cheaper, have not only opted to offer fewer base algorithms that end users can customize but also offer new tweaks, such as working only during the market open or closing auctions. Armed with fewer but more personalized algorithms has been the latest trend in electronic trading.

Heres how the vendors work it. Instead of creating hundreds of esoteric algo types and incurring all the costs of developing them, they are creating perhaps five or six base tools and offering optional features. One provider likened the process to purchasing a car — having two or three basic models and then allowing users to check off an options list of what they want.

That’s what Bank of America told Traders it was doing to its options algorithm suite. The bulge firm, in response to its institutional clientele, has reduced the number of algos it offers to clients to make trading easier and more efficient. The firm originally offered nine algorithms to trade options. By simplifying its offering, BofA Merrill aims to provide more flexibility to traders by merging the functionality of several algorithms into four core strategies. Traders will no longer have to choose one capability at the expense of another; rather, they will be able to combine complimentary functions, said Jonathan Werts, head of electronic derivatives at Bank of America Merrill Lynch.

Also high on the list of algorithmic developments this year was the focus on weeding out high-frequency traders and others who could hinder the buysides ability to source bigger blocks of stock. ITG and Cowen announced offerings designed to help the buyside find liquidity and achieve best execution. ITGs Smart Limit Algorithm, or SLimit, works by employing intelligent passive trading strategies. It employs sophisticated logic to determine optimal order pricing, sizing and routing in order to balance spread capture opportunities and adverse selection risk. Cowens CLEAN SEEK has the same mission — weed out the smaller and often predatory offers but focus on locating dark liquidity.

Lastly, as foreign exchange trading has grown, so has the need for electronic trading tools. Pragma is targeting the $2 trillion spot market. The firm, acting as a service bureau provider, now offers specific FX tools, ranging from simple TWAP to more complex liquidity seekers that minimize market impact.

Heads of equity trading desks are now being pushed to look at other asset classes — namely forex, Curtis Pfeiffer, Pragmas director of sales, told Traders. We can take what weve learned about trading in the fragmented equity market and apply it to FX.

NYSE’s Grand Bargain Just Might Work: Matt Levine

Editorial Staff
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(Bloomberg) — One widely dislikedfeature of U.S. equity markets is the cap on stock-exchange fees at 30 cents per 100 shares. Exchanges don’t actually have 30 cents of cost to trade 100 shares, so you might think that the fees would be competed down to well below the regulatory cap.

But the way the cap works is, exchanges tend to charge the full 30 cents to people who take liquidity, and then rebate most of it to people who provide liquidity,and this drivesa significant portion ofmarket kookiness, as banks look to avoid paying the fees by routing orders to their own dark pools, and as high-frequency traders take advantage of banks’ fee-driven routing of customer orders.

So here is a proposal from the New York Stock Exchangeto cut the exchange-fee cap from 30 cents per 100 to 5 cents,and to introduce a trade-at rule that would requireorders for fewer than 5,000 shares to trade on exchanges unless dark pools can offer significant price improvement. The idea is to get banks to move their trading from their dark pools back onto exchanges,in part by requiring them to do so, and in part by making it cheaper.

Apparently Credit Suisse, the largest dark-pool operator,has signed on, and Nasdaq “also broadly supports the proposal,”but this is not something that NYSE can do unilaterally, and there are those who oppose it.

KCG Holdings, for instance, whose business involves a lot of internalization of retail orders, is not happy, sincethe proposal would more or less ban that practice.

So it’s hard to tell how real the NYSE plan is at this point, though if you asked me whether exchange fee caps will be more like 30 cents or 5 cents in five years I guess I’d take 5 cents.

Elsewhere, the European Securities and Markets Authority is skeptical about dark pools.

(Edited from Levine’s original column.)

STA Proposes Guidelines for SEC’s Tick Size Pilot Program

Editorial Staff
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The folowing is an edited version of the Security Traders Association’s comment letter to the SEC on its Tick Size Pilot Program. The entire letter can be found on the STA website.

Dear Mr. Fields,

The Security Traders Association offers comment on the national market system plan to implement a targeted 12-month pilot program that will widen minimum quoting and trading increments for certain stocks with smaller capitalization. This Plan was filed on November 3, 2014 in response to the June 24, 2014 Securities and Exchange Commission order directing the Exchanges and the Financial Industry Regulatory Authority to submit a tick size pilot plan. Data gathered from the Plan will enable the Commission to study the impact of wider quoting and trading increments on the trading of certain small capitalization stocks.

The STAs unique and focused comments on issues related to market structure come from our roles as practitioners in the markets. STA membership does not represent any specific business model, but rather encompasses a broad range of industry participants. It is from this broad based membership that STA seeks to build bottom-up consensus regarding issues that relate directly to the U.S. securities markets.

STA is revising our recommendation that in addition to an MPV of $0.05 for quoting, companies in the pilot be allowed to trade in $0.005 increments. STA believes that one pilot test group strikes a proper balance between complexity and costs, with an efficient design that yields robust data.

Recommendations Regarding the Plan

STA recommends that the Commission implement a pilot plan which would provide empirical data on the effects decimalization with no minimum price variations has had on the overall liquidity available to investors in companies with small capitalizations. STA understands the complexities of designing, implementing and studying such a plan. Therefore we offer both guiding principles and detailed recommendations in this letter.

Guiding Principles

– The Plan should balance costs and benefits in its design with creating the conditions which allow the variables to be tested efficiently.

– There should be one clearly defined primary goal for the plan. All other goals should be prioritized accordingly or omitted if they pose a conflict or risk to achieving the primary goal.

– Securities with reasonable or ample liquidity which are trading efficiently in todays market structure should not be included in the Plans Selection group.

– Terms and conditions of the Plan should apply to all market participants. Highly efficient markets allow investors of all types and their agents to interact with each other.

– The Plan needs to allow for two features, which all investors find meaningful when investing in companies, regardless of their capitalization: opportunity for price improvement and mid-point trading.

– Data which does not contribute towards measuring improvements or degradations of the primary goal should not be mandated.

– Insight into the Commissions response from specific results should be provided in the Plans final design. Providing such information will enable Participants to understand what Commission defines as a positive or negative result in the data.

Detailed Recommendations

Primary goal should be improving overall liquidity available to investors.

STA continues to believe the primary goal of the Plan should be collecting data which measures overall liquidity, both natural and enhanced, available to investors in small capitalization stocks.

Natural liquidity, simply defined, is liquidity provided by investors and traded through publicly lit and privately unlit markets. Enhanced liquidity is liquidity that exceeds what is publicly and privately available in the market place. Enhanced liquidity could be the result of certain behavior by a sub-category of trading centers that commit capital and conduct secondary offerings or institutional block trades.

It is reasonable for the Plan to gather data for more than one purpose or goal. However, secondary goals should be clearly defined and prioritized. Doing so will ensure variables which may achieve data for secondary goals, but conflict with the primary goal are not implemented into the final design.

Data used for measuring improvements and degradations.

There are some widely used market quantitative measures that when used in conjunction would be effective in measuring improvements and degradations in overall liquidity available to investors:

Publicly available float. Strong correlations exist between a companys publicly available float and the amount of liquidity available to investors. Companies with large publicly available floats tend to be more liquid. We recommend that changes in the amounts of publicly available floats as measured by shares be measured in the Pilot.

Share turnover versus float ratio. Such a measure of stock liquidity is calculated by dividing the total number of shares traded over a period of time by the average number of shares outstanding (publicly available float) for the period. The ratio helps put a companys share volume in perspective as it relates to the companys available float.

Quoted and effective spreads.

Overall Trading volume; both share and dollar.

Aggregate displayed depth of the limit order book.

Volatility. Providers of enhanced liquidity are more inclined to commit capital and more able to conduct block trading if the prices of the security the provider transacts in remains stable.

STA believes gathering data in these categories would provide the Commission robust data for measuring improvements and degradations in overall liquidity available. It is important to note that none of these measurements should be used alone to draw conclusions.

The above six (6) categories of data can be obtained by the Commission via its Market Information Data and Analytics System, MIDAS. Requesting Participants in the Plan to provide this data would be duplicative and unnecessarily increase the costs of the Pilot.

Implementation

The Plan should be implemented on a one-year pilot basis. It should be applicable during and outside of regular trading hours.

The Commission should assess data and make public its findings from the first six months of the Pilot at a reasonable time thereafter.

Conclusion

The STA appreciates the opportunity to comment on the Plan. We also wish to acknowledge and thank the Commission and all the staff responsible for designing the requirements for which the Plan seeks to address.

John Daley
Chairman of the Board

Jim Toes
President and CEO

A FinTech Blueprint for 2015 Traders

Editorial Staff
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Looking back, 2014 brought more attention and investment to financial technology than ever before. According to data from CB Insights, FinTech investment in the U.S. has grown from $750 million in 2008 to slightly under $3 billion in 2014. And the future looks bright with forecasts reaching $4.7 billion in the U.S. and $8 billion globally by 2018.

Market stagnation, regulatory pressure, lower technology barriers to entry, and globalization constitute the core foundation of the current wave of capital markets technology innovation. The demand for solutions in mobile, analytics, cloud, compliance, and security are being driven by the banks, capital markets firms, and insurers.

Aite Group has been tracking this trend since early 2014, and our March report entitled “Capital Markets Tech Vendors 2.0” profiled 13 of the many innovative software vendors and service providers focused on capital markets. Some are on their way and others may not last, but their focus on and developments for Wall Street 2.0 are impressive, and their technology and intellectual property will no doubt live on, forming the foundation for the next generation of market growth.

Our recent research highlights key commonalities among the companies include five traits: democratizing ownership and data sources, leveraging nontraditional data sets, focusing on visualization and user interface, using the cloud for scalability and cost control, and finally, creating and relying on community to constantly improve performance.

This isn’t the only time in recent history that entrepreneurs have sought to make their mark – and money – in capital markets with disruptive technology. In the mid- to late-2000s, firms such as Monitor110, Marketcetera, YellowJacket and Ballista (both acquired by ICE), and Derivix (acquired by Flextrade) were led by founders driven by similar motivations of today’s entrepreneurs. They sought to improve transparency for investors, reduce costs, and deliver a vision there has to be a better way. Prior to this, companies like Bloomberg, CreditEx and Liquidnet were game changers. To their credit, those earlier upstarts toiled in a world without incubators, accelerators, AppStores, Hadoop, cloud-based market data from Xignite, and low-cost platforms like “the cloud.”

Today’s startups include Estimize, Kensho, DataMinr, Quantopian, RobinHood, Motif, Openfin, and IEX. They carry the entrepreneurial torch and are fed by investors such as Goldman Sachs, Bain Capital Ventures, Contour Venture Partners, Bessemer Venture Partners, FirstMark, and Spark. Accelerators such as ValueStream Labs, FinTech Innovation Lab, FinTechStars, and Level39 have sprung up to provide entrepreneurs access to capital, mentorship, and networks.

And while these entrepreneurs have been innovating, the dialogue around Wall Street and D.C. has focused on improving market stability, revamping market structure, reducing systemic risk and regaining the public’s trust. Not all of us, however, have the influence to steer discussions about improving the industry. Those on the front lines are focused on exchange access fees, extending equity platforms to trade fixed income, electronic access to emerging markets, FIX connections, OMS/EMS integration, algorithmic trading, market-making, and the search for alpha.

Act Locally

Its important to recognize that an opportunity to get involved is right in your own backyard. You too can contribute to job creation and technological innovation. Even startups that address the most mundane back-office issues and regulatory requirements create jobs.

A few years ago, the community steering capital markets startups was without real form. Now, the scaffolding is up. Capital markets pose unique challenges, with its long sales cycles, complex integration challenges, and high regulatory and compliance barriers. Most traders and investors arent keen on using “minimum viable products.” Founders need your knowledge, mentorship and access to relationships in order to avoid costly missteps in a highly competitive and regulated industry.

If Wall Street is going to attract the best and brightest, theyll need to know there are interesting and complex challenges to solve and the opportunity is there to use cutting-edge technologies. If your firm isnt using one of node.js, python, Angular.js, Puppet, NoSQL, or a similar technology in your stack, consider doing so. The talent coming out of higher education is learning to use this cutting-edge technology.

It’s not just about the gear. Buyside and sellside professionals must go out and talk about what they do. Work from within to help the industry understand the complexities we face every day. Help in the fight to regain trust in our industry.

If youre not sure where to start, every innovation hub is likely to have a group hosting a FinTech Meetup. Just search FinTech for your locality on Meetup.com and attend your first event.

If 2014 was any indicator for whats in store in FinTech, dont miss out on opportunities in 2015 to get involved. When it comes to capital markets, the time to invest — or re-invest — is now.

Spencer Mindlin is an analyst with Aite Group who focuses on capital markets technology.

Top 2014 Trends: Going Mainstream, IEX Chases Exchange Dream

Editorial Staff
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Upstart alternative trading venue IEX, formed in 2013, has become a household word.

The venue, founded in 2012 and officially opened in October of last year, is backed by the buyside and designed to keep out high-frequency traders and other traders deemed predatory. By keeping out predatory traders that hinder large block trading, the venue has looked to meet the buysides two most important goals – execute block trades and keep its intentions private.

And so far, it has. Lauded by many on the buyside, the venue, started by ex-RBC veterans Brad Katsuyama, Ronan Ryan, Robert Park and John Schwall, has seen its fortunes shine.

The newest trading venue went from zero percent of trading volume to almost 1 percent of U.S. equity volume in just one year and has become the sixth largest private market in the U.S., according to FINRA data. And not content to be just an alternative trading venue, the pool is now actively seeking to become an exchange and complete with the likes of NYSE Euronext, Nasdaq OMX and Direct Edge/BATS.

Since Q1 2014, IEX has reported that its average daily trading volume has climbed by more than 100 million shares.

“Our intention from day one was to challenge the status quo by building a market that prioritizes the needs of traditional investors and issuer companies,” Katsuyama, IEX’s CEO and co-founder, told Traders back in September. “We are encouraged by our recent growth, which has been driven by both investors and their brokers. This additional capital enables us to build and operate a world-class stock exchange.”

But IEX really thundered into the limelight and mainstream American discourse thanks to the Michael Lewis book Flash Boys, released in April and profiled on national TV on 60 Minutes. In the book, Lewis wrote about the deleterious effects of high-frequency trading and how the $24 trillion stock market is rigged. IEX, Lewis wrote, was trying to bring fairness and transparency to the marketplace.

Not content to stop at being an ATS, in September IEX conducted its latest round of funding. The $75 million funding event was led by Spark Capital with participation from Bain Capital Ventures, Franklin Resources, Jim Clark (co-founder of Netscape), MassMutual Ventures and investor Steve Wynn.

Other participants in this round include private investment firms Cleveland Capital Management and TDF Ventures. The financing will be used to pursue registration as a U.S. national exchange and to explore other opportunities to leverage IEX’s brand, capabilities and market position.

Also, IEX recently hired John Ramsay, the former acting director of the SECs Division of Trading and Markets, as its chief market policy and regulatory officer. Ramsay will oversee the firms compliance obligations, including those that would result from the company succeeding in upgrading its regulatory status to an exchange.

Hedge Funds Placed Bullish Brent Bets as Prices Continue to Drop

Editorial Staff
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(Bloomberg) — Hedge funds and other financial traders increased bullish bets on Brent crude, adding to wagers for a fourth week while prices extended declines.

Money managers boosted net-long positions by 23 percent to 132,239 contracts in the week ended Dec. 16, according to ICE Futures Europe exchange. Brent closed 2 percent lower that day after falling to the lowest since May 2009 amid concern that the market is oversupplied.

The Organization of Petroleum Exporting Countries resisted calls from members including Venezuela to reduce its production target of 30 million barrels a day when it met on Nov. 27 in Vienna. Brent fell as low as $58.50 a barrel on Dec. 16 and traded for $61.24 at 1:27 p.m. London time.

Producers, consumers and end users of crude became less bearish in the period covered by ICEs Commitments of Traders report. They pared their net-short position, or bets on falling prices, by 4.8 percent to 318,678 contracts.

ICE publishes, usually each Monday, aggregate numbers for long and short positions for speculators such as hedge funds and institutional investors, as well as commercial companies that buy or sell futures to protect against price moves. Analysts and investors follow changes in speculators positions because such transactions can reflect an expectation of a change in prices.

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